Millennials of modest means, but who are on the right path
to greater wealth, represent a largely untapped opportunity for registered
investment advisers (RIAs) looking to add promising new clients, according to
TD Ameritrade’s Millionaires in the Making survey. The survey shines a light on
the mindset of Millennials and how they intend to map out their financial
futures. While members of this generation are typically painted with a broad
brush, TD Ameritrade took a closer look at how different levels of current
wealth and annual income affect views on financial management and retirement
planning.
Because they are entering peak earning years and
accumulating assets, high-potential Millennials represent an attractive group
of prospective RIA clients—possibly more so than their already-affluent peers,
as they are largely overlooked by most financial firms.
The survey divided participants into three groups:
High-net-worth Millennials; potential high-net-worth Millennials; and mass
affluent. High-net-worth Millennials have more than $500,000 to invest and are
likelier to hire an adviser. Chances are good they will retain their family’s
adviser. These wealthy Millennials are more inclined to seek an adviser who is
a contemporary, rather than someone older, so attracting this group may require
hiring young advisers.
Potential high-net-worth Millennials have less than $500,000
to invest but earn more than $150,000 a year. These investors aren’t rich, but
they’re building wealth and have prospects, like inheritance, that put them on
an upward trajectory. This group is mostly overlooked by financial firms and
may be inclined to hire their own adviser, creating a possible opportunity for
RIAs. More women (62%) fell into this category than men.
Mass-Affluent Millennials earn less than $150,000 and have
less than $500,000 to invest. This group is worried about outliving their
savings, meeting healthcare costs and having to work longer. Mass affluent
Millennials are less likely to hire an adviser, seeking financial guidance
instead from family and friends.
Retirement Concerns
Less-wealthy Millennials expect to work longer and need more
retirement savings. The potentially wealthy expect to work longer, with an
average retirement target age of 60.1 years, compared with 56.8 years among
already-wealthy peers. Potentials anticipate needing to save more before they
can retire: $5 million versus $4.5 million among the already-wealthy.
Top retirement concerns are consistent among the three
groups. Millennials worry about outliving their savings, needing to work longer
and meeting health care expenses. High-net-worth Millennials were less worried,
but are mindful of the cost of caring for an elderly parent or relative.
Current wealth impacts whether an investor keeps or fires
their family’s adviser. Of high-potential Millennials with an adviser, 55%
hired their own adviser while just 29% plan to keep the incumbent family
adviser. By comparison, 63% of wealthy Millennials with an adviser said they
kept their family’s adviser and had no plans to change.
Wealthy Millennials are more likely to use an adviser than
their high potential peers: 65% versus 33%. However, nearly 70% of
high-potential Millennials want an adviser to help manage their finances.
Millennials expressed varying views on how old their adviser
should be. The majority of high-potential Millennials seek out an adviser who
is older, while high-net-worth Millennials showed a stronger preference for
advisers their own age.
Wealthy Millennials want many communications options.
High-net-worth Millennials favor a range of communications channels with their
advisers, from email and phone to in-person meetings and social media.
High-potential and mass affluent Millennials prefer email by a wide margin.
Whatever the channel, Millennials expect advisers to be accessible and immediately
responsive.
Millennial Optimists,
Pessimists
The definition of financial success varies. For wealthy
Millennials, success means not depending on a job for income, having enough to
indulge in luxury items and setting aside money for retirement and education.
High-potential and mass-affluent Millennials are more concerned with having
enough stashed away for a comfortable retirement.
Less-wealthy Millennials are more optimistic about reaching
their goals than wealthier peers. Nearly two-thirds of potentially wealthy
Millennials were optimistic about their financial prospects, compared with half
of the already-wealthy. Wealthy Millennials were more likely to be pessimistic
about achieving their goals than the potentials: 26% versus 5%.
Hard work and smart investments are top factors in achieving
financial success. When it comes to how they can acquire wealth, all
Millennials rate making smart investments and hard work as keys. The mass
affluent and high-potential said being frugal is a top factor, while
high-net-worth Millennials cited family connections and owning a business.
The Millionaires in the Making Study surveyed 536 investors
between the ages of 18 and 39 by telephone from January 15 to February 28,
2014, on their views on brands in the financial services industry. Another 273
investors 40 years and older were surveyed for comparative purposes. The survey
was fielded by the Pert Group, a separate, unaffiliated company.
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